Cleveland City Council on Monday slated federal coronavirus aid for forgiving residents’ medical debts.
The legislation will spend $1.9 million in American Rescue Plan Act funds to buy patient debt for a penny on the dollar from local healthcare providers – and then wipe that debt away.
A key question is whether healthcare providers will agree to sell their debt. RIP Medical Debt, the national nonprofit contracted by council for the project, is discussing debt purchases with Cleveland’s major hospitals, according to Keith Hearle, an advisor for the nonprofit.
The nonprofit is competing with commercial debt collectors for those unpaid bills. Hearle said he believes RIP Medical Debt offers a fair market price for that debt, which it would then cancel.
“We’re giving hospitals a choice between doing something really wonderful for patients, or selling their medical debt on the commercial debt market, in which case it goes through another round of collections,” he said at a news conference Monday.
Hearle later told council that, while talks to buy debt are still ongoing, none of Cleveland’s hospitals had turned down the idea.
Angela Smith, a Cleveland Clinic spokeswoman, wrote to Signal Cleveland that the hospital system was open to a conversation.
“We have a high-level awareness of RIP Medical Debt but are not familiar with the program’s specific details. We are open to learning more and having discussions related to selling medical debt at a discount,” she wrote.
The statement continued: “Cleveland Clinic provides free or discounted care to patients with incomes up to 400% of the federal poverty level and covers both hospital care and our employed physician services. In 2021, we provided financial assistance to nearly 140,000 patients who were unable to pay some or all of their medical bills.”
A representative for the MetroHealth System said the public hospital was supportive of the concept. University Hospitals is also open to the idea, a spokesman said.
RIP Medical Debt plans to buy debt that could be a year old or even older. Hearle termed this “terminal bad debt,” the sort of debt that hospitals have already tried and failed to collect.
Residents won’t have to apply to have their debt forgiven. Instead, RIP Medical Debt will buy and forgive the debts of people who meet certain income thresholds. Households making up to 400% of the federal poverty guidelines would be eligible. Currently, the poverty line is $30,000 for a family of four.
Also eligible are patients whose debt represents 5% or more of their annual household income.
Other cities have also taken up RIP Medical Debt on its offer to buy residents’ old hospital bills. Toledo, Lucas County and Chicago’s Cook County have also embraced the idea.
Despite being one of America’s poorest cities, Cleveland is home to major hospital systems that employ tens of thousands of people throughout the region.
City Council members said the debt forgiveness measure would lift a burden from the backs of average residents. Council President Blaine Griffin said he expects the measure could help nearly 50,000 people.
“The people that we’ve talked to in the neighborhoods are excited about this,” he said. “Everybody that we know in our neighborhoods are dealing with this kind of an issue. So we believe that this is an everyday-people issue in the city of Cleveland that council is addressing.”
Updated April 25 with comment from University Hospitals.